ISO 20022: The story so far

Posted: 19/01/2023 | Read time: 4 minutes


As finance becomes increasingly globalised, the need for a simplified and standardised cross-border payments messaging system has become more crucial than ever.

Growing demand for the safe and efficient flow of payments messages has culminated in the creation of ISO 20022, which is a common language for payments worldwide.

With ISO 20022 migration beginning in November 2022 – and the UK’s Clearing House Automated Payment System (CHAPS) switching to full ISO 20022 in April 2023 – the clock is ticking for financial institutions to prepare for the new standard.

That’s why we have set out everything banks and payments firms need to know about ISO 20022.

Read on to discover how ISO 20022 impacts firms, key dates and the challenges and opportunities involved.


What is ISO 20022?

ISO 20022 is a multi-part International Standard prepared by ISO Technical Committee 68, which is responsible for the financial services industry. It is a new messaging standard for payments, which means that financial institutions can communicate using a “single, common language.”

ISO 20022 uses XML syntax. It will replace more than 400 message types (MT).

The new messaging system is expected to result in richer and better-structured data in payment processes, allowing ten times more data about each payment to be sent. This includes information about the purpose, source, and beneficiary.


ISO 20022 timeline

The SWIFT community was consulted on ISO 20022 migration in 2016. But the G20 prioritised its implementation in 2020.

The Financial Stability Board (FSB), the Committee on Payments and Market Infrastructures (CPMI), and other relevant organisations, developed the initial roadmap for ISO 20022. G20 leaders then approved it at their summit in November 2020.

The key ISO 20022 migration dates are as follows:

  • August 2022 – ISO 20022 migration begins on an opt-in basis.
  • November 2022 – The “coexistence period” begins. Financial institutions will begin to migrate to ISO 20022 for cross-border payments and reporting.
  • April 2023 – CHAPS, the UK’s high-value payments system, will switch to full ISO 20022 in April 2023.
  • November 2025 – End of the “coexistence period.” Most of the world’s payments systems will have adopted the ISO 20022 messaging standard. Cross-border payments and reporting MT messages will be decommissioned.


Who is ISO 20022 for?

While ISO 20022 is predominantly for banks and payments firms, the new messaging standard will also be used by organisations in securities, foreign exchange, cards, and other related services.

These firms will use ISO 20022 for end-to-end straight-through processing (STP), components management, and regulatory reporting.


The opportunities of ISO 20022

When financial institutions – including SWIFT, the Federal Reserve, the Bank of England, and large payment organisations, such as Visa and Mastercard – fully mandate and drive adoption to ISO 20022, it should simplify operations for payment organisations.

ISO 20022 is expected to open new opportunities for financial institutions by making payments faster, cheaper, and more transparent.

According to EY, ISO 20022 will allow banks to offer better quality reconciliations, as well as real-time and automated payments. This analysis corresponds to our recent payments survey, which found that many payments firms believe ISO 20022 has the potential to improve all aspects of the reconciliation function.

We asked 500 firms of varying sizes what aspects of the data handling and reconciliation process ISO 20022 would improve.

Some 40% of companies with more than 500 employees said the data transformation and enrichment phase would improve the most. Many firms also expect improvements in downstream matching and exception investigation and management processes.

From our survey, we can expect standardisation of payments messaging through ISO 20022 to reduce incomplete and unmatchable data. This will greatly reduce the labour-intensive steps of financial control processes and help payments firms scale more effectively.


The challenges

Overall, ISO 20022 should be viewed as an opportunity to provide a better customer experience, enhance compliance and create a more harmonised payments industry – rather than as a burden that requires a short-term solution.

The migration to ISO 20022, however, will significantly impact the back office of every financial services firm globally. Firms should therefore be prepared for the challenges that migration may present, especially for those still reliant on legacy technology.

Firms must update their systems to get the most from ISO 20022 and fully take advantage of better and richer data across the payments ecosystem. This will ensure that, as well as the initial migration, firms are prepared for any updates to the standard as it develops in the future.